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Test Bank Chapter 3 Job Order Costing
Test Bank Chapter 3 Job Order Costing
True/False
4. Normally a job cost sheet is not prepared for a job until after the
F job has been completed.
Medium
5. Job cost sheets contain entries for actual direct material, actual
F direct labor, and actual manufacturing overhead cost incurred in
Easy completing a job.
15. The labor time ticket contains a detailed summary of the direct and
T the indirect labor hours of an employee.
Easy
Multiple Choice
16. Which of the following companies would be most likely to use a job-
B order costing system rather than a process costing system?
Easy a. fast food restaurant
b. shipbuilding
c. crude oil refining
d. candy making
19. In job-order costing, all of the following statements are correct with
D respect to labor time and cost except:
Medium a. time tickets are kept by employees showing the amount of work
on specific jobs.
b. the job cost sheet for a job will contain all direct labor
charges to that particular job.
c. labor cost that can be traced to a job only with a great deal
of effort is treated as part of manufacturing overhead.
d. a machine operator performing routine annual maintenance work
on a piece of equipment would charge the maintenance time to a
specific job.
20. In a job order cost system, the journal entry to record the
A application of overhead cost to jobs would include:
Medium a. a credit to the Manufacturing Overhead account.
b. a credit to the Work in Process inventory account.
c. a debit to Cost of Goods Sold.
d. a debit to the Manufacturing Overhead account.
22. In a job order cost system, the use of direct materials previously
23. In a job-order cost system, direct labor costs usually are recorded
D initially with a debit to:
Easy a. Manufacturing Overhead.
b. Finished Goods inventory.
c. Direct Labor Expense.
d. Work in Process.
30. Carlo Company uses a predetermined overhead rate based on direct labor
B hours to apply manufacturing overhead to jobs. The company estimated
Medium manufacturing overhead at P255,000 for the year and direct labor-hours
CPA at 100,000 hours. Actual manufacturing overhead costs incurred during
adapted the year totaled P270,000. Actual direct labor hours were 105,000.
What was the overapplied or underapplied overhead for the year?
a. P2,250 overapplied.
b. P2,250 underapplied.
c. P15,000 overapplied.
d. P15,000 underapplied.
Dept. A Dept. B
Direct labor cost ........ P56,000 P33,000
Factory overhead ......... 67,200 45,000
Direct labor hours ....... 8,000 9,000
Machine hours ............ 4,000 15,000
Kelsh estimates that 5,000 direct labor hours and 10,000 machine hours
will be worked during the year. The predetermined overhead rate per
hour will be:
a. P6.80.
b. P6.40.
c. P3.40.
d. P8.20.
Simplex estimates that 10,000 direct labor and 16,000 machine hours will
be worked during the year. If overhead is applied on the basis of
machine hours, the overhead rate per hour will be:
a. P8.56.
b. P7.63.
c. P6.94.
d. P3.50.
36. CR Company has the following estimated costs for the next year:
A
Medium Direct materials ..................... P 4,000
Direct labor ......................... 20,000
Rent on factory building ............. 15,000
Sales salaries ....................... 25,000
Depreciation on factory equipment .... 8,000
Indirect labor ....................... 10,000
Production supervisor’s salary ....... 12,000
CR Company estimates that 20,000 labor hours will be worked during the
year. If overhead is applied on the basis of direct labor hours, the
overhead rate per hour will be:
a. P2.25.
b. P3.25.
c. P3.45.
d. P4.70.
39. Worrell Corporation has a job-order cost system. The following debits
C (credits) appeared in the Work in Process account for the month of
Hard March:
CPA
adapted March 1, balance ....................... P 12,000
March 31, direct materials ............. 40,000
March 31, direct labor ................. 30,000
March 31, manufacturing overhead applied 27,000
March 31, to finished goods ............ (100,000)
41. Beaver Company used a predetermined overhead rate last year of P2 per
B direct labor hour, based on an estimate of 25,000 direct labor hours
Easy to be worked during the year. Actual costs and activity during the
year were:
42. Dowan Company uses a predetermined overhead rate based on direct labor
B hours to apply manufacturing overhead to jobs. Last year Dowan Company
Hard incurred P156,600 in actual manufacturing overhead cost. The
Manufacturing Overhead account showed that overhead was underapplied
by P12,600 for the year. If the predetermined overhead rate is P6.00
per direct labor hour, how many hours did the company work during the
year?
a. 26,000 hours
b. 24,000 hours
c. 28,200 hours
d. 25,000 hours
44. Sweet Company applies overhead to jobs on the basis of 125% of direct
A labor cost. If Job 107 shows P10,000 of manufacturing overhead
Medium applied, how much was the direct labor cost on the job?
a. P8,000
b. P12,500
c. P11,250
d. P10,000
45. Knowlton Company applies overhead to completed jobs on the basis of 70%
C of direct labor cost. If Job 501 shows P21,000 of manufacturing overhead
Medium applied, the direct labor cost on the job was:
a. P14,700.
b. P21,000.
c. P30,000.
d. P27,300.
46. The balance in White Company's Work in Process inventory account was
A P15,000 on August 1 and P18,000 on August 31. The company incurred
Hard P30,000 in direct labor cost during August and requisitioned P25,000
in raw materials (all direct material). If the sum of the debits to
the Manufacturing Overhead account total P28,000 for the month, and if
the sum of the credits totaled P30,000, then:
a. Finished Goods was debited for P82,000 during the month.
b. Finished Goods was credited for P83,000 during the month.
c. Manufacturing Overhead was underapplied by P2,000 at the end of
the month.
d. Finished Goods was debited for P85,000 during the month.
48. Compute the amount of direct materials used during November if P20,000
A in raw materials were purchased during the month and if the
Easy inventories were as follows:
Balance Balance
November 1 November 30
Raw materials .... P 4,000 P 3,000
Work in process .. 12,000 15,000
Finished goods ... 24,000 27,000
a. P21,000.
b. P19,000.
c. P18,000.
d. P15,000.
49. Sharp Company's records show that overhead was overapplied by P10,000
C last year. This overapplied overhead was closed out to the Cost of
Hard Goods Sold account at the end of the year. In trying to determine why
overhead was overapplied by such a large amount, the company has
discovered that P6,000 of depreciation on factory equipment was
charged to administrative expense in error. Given the above
information, which of the following statements is true?
a. Manufacturing overhead was actually overapplied by P16,000 for
the year.
b. The company's net income is understated by P6,000 for the
year.
c. Under the circumstances posed above, the error in recording
depreciation would have no effect on net income for the year.
d. The P6,000 in depreciation should have been charged to Work in
Process rather than to administrative expense.
March 1 March 31
Direct Materials....... P36,000 P30,000
Work in Process........ 18,000 12,000
Finished Goods......... 54,000 72,000
Reference: 3-2
Hamilton Company uses job-order costing. Manufacturing overhead is applied using a
predetermined rate of 150% of direct labor cost. Any over- or underapplied
manufacturing overhead is closed to the Cost of Goods Sold account at the end of each
month. Additional information is available as follows:
Job 101 was the only job in process at January 31. The job cost sheet for
this job contained the following costs at the beginning of the month:
Reference: 3-3
Meyers Company had the following inventory balances at the beginning and end of
November:
November 1 November 30
Raw Materials ...... P17,000 P20,000
Finished Goods ..... P50,000 P44,000
Work in Process .... P 9,000 P11,000
During November, P39,000 in raw materials (all direct materials) were drawn from
inventory and used in production. The company's predetermined overhead rate was P8
per direct labor-hour, and it paid its direct labor workers P10 per hour. A total of
300 hours of direct labor time had been expended on the jobs in the beginning Work in
Process inventory account. The ending Work in Process inventory account contained
P4,700 of direct materials cost. The Company incurred P28,000 of actual manufacturing
overhead cost during the month and applied P26,400 in manufacturing overhead cost.
55. The direct materials cost in the November 1 Work in Process inventory
C account totaled:
Medium a. P6,600.
Refer To: b. P6,000.
3-3 c. P3,600.
d. P3,000.
57. The amount of direct labor cost in the November 30 Work in Process
C inventory was:
Hard a. P2,800.
Refer To: b. P3,300.
3-3 c. P3,500.
d. P6,300.
Reference: 3-4
The following T accounts are for Stanford Company:
Accumulated Depreciation—
Factory
| 82,000 Beg. Bal.
| 16,000 (3)
60. The cost of goods sold (after adjustment for under- or overapplied
C overhead) is:
Hard a. P58,000.
Refer To: b. P69,000.
3-4 c. P72,000.
d. P65,000.
Reference: 3-5
Mallet Company has only Job 844 in process on March 1 of the current year. The job has
been charged with P2,000 of direct material cost, P2,500 of direct labor cost, and
P1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a
predetermined rate of 70% of direct labor cost. Any under- or overapplied overhead
cost is closed to Cost of Goods Sold at the end of the month.
Labor:
Direct labor hours worked during the month ..... 2,500
Direct labor cost incurred ..................... P26,500
Indirect labor costs incurred .................. P5,500
Inventories:
Raw materials (all direct) March 31 ............ P7,500
Work in process, March 31 ...................... P14,500
64. The amount of direct materials cost in the March 31 work in process
A inventory account was:
Medium a. P5,150.
Refer To: b. P9,350.
3-5 c. P9,000.
d. P3,850.
66. The entry to dispose of the under- or overapplied overhead cost for the
B month would include:
Hard a. a debit of P50 to Cost of Goods Sold.
Refer To: b. a debit of P50 to Manufacturing Overhead.
3-5 c. a debit of P5,500 to Manufacturing Overhead.
d. a credit of P5,500 to Cost of Goods Sold.
67. The balance in the March 1 in the Raw Materials inventory was:
D a. P10,500.
Hard b. P9,500.
Refer To: c. P6,500.
3-5 d. P8,500.
The company uses a predetermined overhead rate of P5.00 per direct labor hour to
apply manufacturing overhead to jobs.
68. The actual overhead cost incurred during the month was:
C a. P50,000.
Medium b. P55,000.
Refer To: c. P40,000.
3-6 d. P45,000.
69. The total cost added to Work in Process during May was:
B a. P101,000.
Medium b. P106,000.
Refer To: c. P61,000.
3-6 d. P111,000.
Reference: 3-7
The information below has been taken from the cost records of Tercel Company for the
past year:
Inventories
Beginning Ending
Raw Materials ............. P75,000 P 85,000
Work in Process ........... 80,000 30,000
Finished Goods ............ 90,000 110,000
71. Direct labor costs charged to production during the year amounted to:
B a. P135,000.
Medium b. P225,000.
CMA c. P360,000.
adapted d. P216,000.
Refer To:
3-7
73. The Cost of Goods Sold for the year (before disposition of any
B overhead under- or overapplied) was:
Medium a. P736,000.
CMA b. P716,000.
adapted c. P691,000.
Refer To: d. P801,000.
3-7
Reference: 3-8
The following data are for Potras Company:
Beginning Ending
Finished goods inventory ............ P30,000 P40,000
Work in process inventory ........... P20,000 P13,000
Raw materials inventory ............. P21,000 P26,000
Purchases of raw materials .......... P71,000
Factory depreciation ................ P 5,000
Other factory costs ................. P10,000
Direct labor ........................ P27,000
Indirect labor ...................... P 6,000
Selling expense ..................... P12,000
Over- or underapplied overhead ...... -0-
Reference: 3-9
The Bus Company uses a job-order cost system. The following information was recorded
for September:
The direct labor wage rate is P10 per hour. Overhead is applied at the rate of P5 per
direct labor-hour. Jobs 1, 2, and 3 have been completed and transferred to finished
goods. Job 2 has been delivered to the customer.
79. The Cost of Goods Sold for September (before disposition of any under-
A or overapplied overhead) is:
Medium a. P2,100.
Refer To: b. P5,925.
3-9 c. P3,700.
d. P1,950.
81. The entry to transfer the cost of goods manufactured for the period
C is:
Medium a. 1.
Refer To: b. 4.
3-10 c. 7.
d. 5.
Reference: 3-11
Summit Company has provided the following inventory balances and manufacturing cost
data for the month of January:
Month of January
Cost of goods manufactured ........ P515,000
Manufacturing overhead applied .... P150,000
Direct materials used ............. P190,000
Actual manufacturing overhead ..... P144,000
Under Summit's job-order costing system, any over or underapplied overhead is closed
to the Cost of Goods Sold account at the end of the calendar year (i.e., December
31).
84. What was the total amount of direct material purchases during January?
D a. P180,000
Medium b. P190,000
CPA c. P195,000
adapted d. P200,000
Refer To:
3-11
85. How much direct labor cost was incurred during January?
C a. P170,000
Medium b. P175,000
CPA c. P180,000
adapted d. P186,000
Refer To:
3-11
Reference: 3-12
The Tse Manufacturing Company uses a job-order costing system and applies overhead to
jobs using a predetermined overhead rate. The company closes any balance in the
Manufacturing Overhead account to Cost of Goods Sold. During the year the company's
Finished Goods inventory account was debited for P125,000 and credited for P110,000.
The ending balance in the Finished Goods inventory account was P28,000. At the end of
the year, manufacturing overhead was overapplied by P4,500.
86. The balance in the Finished Goods inventory account at the beginning
B of the year was:
Hard a. P28,000.
Refer To: b. P13,000.
3-12 c. P17,500.
d. P8,500.
87. If the estimated manufacturing overhead for the year was P24,000, and
B the applied overhead was P26,500, the actual manufacturing overhead
Medium cost for the year was:
Essay
88. Parker Company uses a job order cost system and applies manufacturing
Medium overhead to jobs using a predetermined overhead rate based on direct
labor-hours. Last year manufacturing overhead and direct labor-hours
were estimated at P50,000 and 20,000 hours, respectively, for the
year. In June, Job #461 was completed. Materials costs on the job
totaled P4,000 and labor costs totaled P1,500 at P5 per hour. At the
end of the year, it was determined that the company worked 24,000
direct labor hours for the year and incurred P54,000 in actual
manufacturing overhead costs.
Required:
a. Job #461 contained 100 units. Determine the unit cost that
would appear on the job cost sheet.
Answer:
a. Direct materials ............ P4,000
Direct labor ............... 1,500
Overhead (300* x P2.50**) .. 750
Total ..................... P6,250
Unit cost .................. P62.50
Work in Process
______________________________________________________________________
_____________________________
Balance -0- | 95,000 Transferred out
Direct materials 20,000 |
Direct labor 30,000 |
Manufacturing Overhead 60,000 |
______________________________________________________________________
______________________________
Balance 15,000 |
Only Job 105 was still in process at the end of the month. This job
had been charged with P3,000 in direct materials cost.
Required:
a. Complete the following job order cost card for Job 105:
Answer:
a. Since only Job 105 was in process at the end of the month, all
of the P15,000 balance in the Work in Process account must apply
to it.
90. Stan Wilson, a newly hired worker at Superior Molding, was puzzled by
Easy the job cost sheets attached to the jobs he worked on. He understood
the materials and labor cost entries--these represent the actual costs
of materials he requisitioned for the job and the cost of the labor
hours he recorded for the job. However, he did not understand the
entry for Manufacturing Overhead. This entry was made at the end of
the day by the accountants and he had no idea where this number came
from. He asked the company's controller, Mary Donner, but the only
part of the explanation he understood was that the overhead entries do
not represent actual overhead costs.
Required:
Answer:
The Manufacturing Overhead entries on the job cost sheet are arrived
at by applying a predetermined overhead rate to the base, which is
most likely direct labor-hours. This number does not represent actual
overhead costs. There are several reasons for this. First, by
definition, it is difficult or impossible to trace overhead costs to
particular jobs. Therefore, actual overhead costs cannot really be
traced to the jobs Stan works on. Even so, an "actual" rate could be
used instead of a predetermined rate for spreading overhead costs
among jobs. However, most companies choose to use a predetermined rate
since actual rates tend to fluctuate and cannot be determined until
the close of the accounting period.
Beginning Ending
Balance Balance
Raw materials ........ P14,000 P22,000
Work in process ...... 27,000 9,000
Finished goods ....... 62,000 77,000
Required:
Answer:
a. Schedule of cost of goods manufactured
Direct materials:
Raw materials inventory, beginning ....P 14,000
Add: purchases of raw materials ....... 315,000
Total raw materials available ......... 329,000
Deduct: raw materials inventory, ending 22,000
Raw materials used in production ...... 307,000
Less: indirect materials .............. 26,000
Direct materials ........................ 281,000
Direct labor ............................ 377,000
Manufacturing overhead applied .......... 238,000
Total manufacturing costs ............... 896,000
Add: Beginning work in process inventory 27,000
923,000
Deduct: Ending work in process inventory 9,000
Cost of goods manufactured ..............P 914,000
c. Income Statement
Required:
Prepare the appropriate journal entry for each of the items above (a.
through j.). You can assume that all transactions with employees,
customers, and suppliers were conducted in cash.
Answer:
a. Raw Materials Inventory ........ 411,000
Cash ...................... 411,000
Required:
Answer:
By the end of the first month (January), all jobs but RX-115 were
completed, and all completed jobs had been delivered to customers
except for SL-205.
Required:
Answer:
The Finished Goods inventory consists only of job SL-205. The balance
95. Dotsero Technology, Inc., has a job-order costing system. The company
Medium uses predetermined overhead rates in applying manufacturing overhead
cost to individual jobs. The predetermined overhead rate in Department A
is based on machine-hours, and the rate in Department B is based on
direct materials cost. At the beginning of the most recent year, the
company’s management made the following estimates for the year:
Department
A B
Machine-hours ................. 70,000 19,000
Direct labor-hours ............ 30,000 60,000
Direct materials cost ......... P195,000 P282,000
Direct labor cost ............. P260,000 P520,000
Manufacturing overhead cost ... P420,000 P705,000
Job 243 entered into production an April 1 and was completed on May 12.
The company’s cost records show the following information about the job:
Department
A B
Machine-hours ................. 250 60
Direct labor-hours ............ 70 120
Direct materials cost ......... P840 P1,100
Direct labor cost ............. P610 P880
At the end of the year, the records of Dotsero showed the following
actual cost and operating data for all jobs worked on during the year:
Department
A B
Machine-hours ................. 61,000 20,000
Direct labor-hours ............ 28,000 66,000
Direct materials cost ......... P156,000 P284,000
Manufacturing overhead cost ... P385,000 P705,000
Required:
Answer:
c. Department A Department B
Manufacturing overhead incurred... P385,000 P705,000
Manufacturing overhead applied:
61,000 X P6.00 = ............. 366,000
P284,000 X 250% = ............. 710,000
Underapplied (overapplied) overhead P 19,000 P (5,000)
96. Scanlon Company has a job-order costing system and applies manufacturing
Medium overhead cost to products on the basis of machine hours. The following
estimates were used in preparing the predetermined overhead rate for the
most recent year:
Required:
b. Determine the difference between net income for the year if the
under- or overapplied overhead is allocated to the appropriate
accounts rather than closed directly to Cost of Goods Sold.
Inventories:
Raw materials, beginning ... P 5,000
Raw materials, ending ...... 4,400
Work in process, beginning . 3,500
Work in process, ending .... 4,500
Required:
Answer:
b. Kamas Company
Schedule of Cost of Goods Manufactured
For the Year Just Ended
Direct materials:
Raw materials, beginning ............... P 5,000
Add purchases of raw materials ......... 15,000
Raw materials available for use ........ 20,000
Deduct raw materials inventory, ending . 4,400
Required:
Prepare a schedule of cost of goods manufactured for the month.
Computations:
Raw materials:
Beginning: 1,100 @ P4 ................. P 4,400
Purchases: 7,000 @ P5 ....... P35,000
6,000 @ P5.50..... 33,000 68,000
Ending: 1,100 @ P5.50 .............. (6,050)
Raw materials used ..................... P69,350
Units:
1,100 + 7,000 + 6,000 – 13,000 = 1,100 units in ending inventory.